Maximizing House Value

Discussion in 'Homesteading Questions' started by minnikin1, Mar 19, 2005.

  1. minnikin1

    minnikin1 Shepherd

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    We want to get an equity loan on our current home and take that money to buy our homestead.
    We've been fixing this place up so our appraisal will be as high as possible.

    It's a 2 bedroom house with attached garage.
    We are trying to decide if we should

    leave the garage as it is, or convert a third bedroom?

    My quesiton is, what would get us the most appraisal "points". A 3 br house with more sq footage and no garage, or the 2 br with garage? Would the points increase be worth the bother?
     
  2. Mutti

    Mutti Well-Known Member Supporter

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    Don't know about points but seems to me a 2 bedroom that was designed as such will sell as is....most garage conversions end up with some awkward way to get to this new bedroom and there are building codes refering to access to bedrooms for safety. Seems to me a person would buy a two bedroom and add to it if they wanted. Better to spend money on a through cleaning inside and out, de-clutter,fresh neutral paint, super shiny kitchen and bath, flowers outside. People like to plan what they will do to a new place...know when we sold a beautiful home in MI the new owners came and covered all the maple floors with carpet and tore out the custom kitchen cabinets --who knows why? DEE
     

  3. Freeholder

    Freeholder Well-Known Member

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    Is there some reason why you can't just sell the current house and buy the homestead? You would be MUCH better off without any mortgage debt (or any other debt, for that matter). There are some serious issues with the economy right now, and people with no debt will weather economic troubles in much better shape than people who are up to their ears in mortages.

    JMO

    Kathleen
     
  4. Mudwoman

    Mudwoman Well-Known Member

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    Your house will be compared to others in your immediate neighborhoods. So, the question is: Has the typical home in your area taken in the garage for a 3rd bedroom, or do most of the homes have a garage? What appraisers/mortgage companies look at is whether or not your home is typical of the area. They don't like unusual stuff. Makes the potential for your home to be harder to sell should you default.

    Kathleen makes a good point on debt. I would be inclined to advise that you sell your current home and rent something cheap and apply your funds to buying the homestead. The current housing market is a bubble. I remember a similar bubble in the late 80's/early 90's. People found themselves owing far more than their houses were worth when the bubble burst and if they didn't have a pocket of cash to go to the closing table with in order to sell their house, they ended up with a foreclosure on their credit, a huge tax bill, and a judgement from the mortgage co. Now would be the time to sell, not borrow more against the house.
    I'm all for buying a homestead even with the prices elevated. You do NOT want to move to a homestead with debt!!!!!!

    Charlee
     
  5. Maura

    Maura Well-Known Member Supporter

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    If the garage isn't finished, drywall it and make sure it has sufficient el outlets to meet residential code. Insulate, if necessary in your area. You will need to use 5/8" firewall. This way, if someone would prefer a three bedroom but can't afford one, they could see the potential of turning your garage into a 3rd bedroom, or family room. This may or may not bring you more money on the market, but it will make the house sell faster. For an appraisal, a finished garage is worth more.
     
  6. perennial

    perennial Well-Known Member

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    Keep it as a garage. We are in the process of selling and that is the one point against us so the realtor says. We shall see. It's the one thing we have that most other people seem to have. We do have other major pluses, but garages add lots to the value - don't renovate!
     
  7. minnikin1

    minnikin1 Shepherd

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    Thanks for all of the input!
    I'm thinking we probably won't bother with the garage conversion. I'd rather spend my time making a homestead!

    About selling and avoiding debt:
    We avoid debt on items that depreciate in value, like cars, or appliances or mobile homes.
    Going into "debt" for investment is not the same thing. Example:

    We bought this place for cash with the intent to keep it for rental income and as an asset to sell when we retire. It is a type of "401K account" for us.
    With interest rates so low, the rent we can take in greatly exceeds what we would pay out for the loan, taxes, and insurance combined if we "borrow" against it.
    Our tenants will, in effect, be buying our homestead for us.
    It doesnt make fiscal sense to sell out if we can keep a property that will gain value over the long haul, provide rental income now AND cash to buy our new farm...
    Plus we're saving money by not getting a conventional mortgage and all the closing costs that entails.
    Worst case scenario - If the market takes a dump, we could possiblly lose the little income property. Not likely though, because we can hang on to it until the market turns around again.
    Either way, the homestead will be paid for.
     
  8. goatlady

    goatlady Well-Known Member Supporter

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    Hate to disillusion you but you will have mortgage costs plus appraisal costs if you take out a mortgage on your current property. An equity loan is still a conventional mortgage loan and all the normal costs apply i.e. title insurance, appraisal, loan fee, closing fee, recording and document fees.
     
  9. Ann-NWIowa

    Ann-NWIowa Well-Known Member Supporter

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    Home equity loan = 2nd mortgage. A down turn in the economy, family illness, accident or anything that affects your earnings could mean losing the home. Also, home equity loans tend to have higher interest. If you're dealing with a local bank, you'll probably not be borrowing more than the property is worth. However, if you go to equity lenders you see advertising on TV or the Internet, they will loan more than the property is worth. Even with a local bank if the housing bubble bursts, you could end up owing more than the home is worth. When that happens, you won't be able to sell. Personally, I think home equity loans are dangerous. No one wants to end up homeless and unfortunately I've seen that happen several times lately due to home equity loans.
     
  10. homebirtha

    homebirtha Well-Known Member

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    All areas are different, but in this area, a garage adds about $8000 to an appraisal. I think another bedroom might push it up $10k, so I don't think the money and hassle would be worth it.

    I disagree with the real estate "experts" here. Real estate will continue to be a good investment. Even if prices drop, which I'm not convinced they will, they always come back up and as long as you can hang on to the property, you'll make money. I think your plan makes a lot of sense.

    I've heard the bubble theory for the last 4 or 5 years. In that time, while some folks were too afraid to take on mortgage debt, we bought and sold a house and made $115,000 on it.

    Also, goatlady, yes there are closing costs on a home equity loan, but they're not anywhere near what they are on a full house purchase. The closing costs on our mortgage were approximately $18000. Our home equity loan costs about $3500.

    I say go for it!
     
  11. minnikin1

    minnikin1 Shepherd

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    Thanks, homebirtha. Our strategy has been working well for us so far. This will be the fifth property we'll acquire this way - we still own all of them - and they're all paid for. Our equity loans have been very cheap to get into and we pay them off fast.
    I don't really know how this thread got so far off track. Our choice of how we plan to get our homestead was never in question.
    I just wanted to find out more about appraisals.
     
  12. Mudwoman

    Mudwoman Well-Known Member

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    It got off because you failed to mention that the home you are in is paid for and that you have others paid for that you rent. You stated that you were getting an equity loan, which is a 2nd lien and not a 1st lien which you would have if you borrow money. Why not borrow on the other rentals? And if you have all these homes paid for and collecting rent and you paid cash for them, you must be buying one heck of a homestead to have to borrow to buy it. Sorry, the scenario just doesn't make sense to me based on how you have presented it.
     
  13. minnikin1

    minnikin1 Shepherd

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    I apologize, Mudwoman, I wasn't trying to mislead anybody.

    On the other hand, I don't think the other information was relevant to my question, anyway, which was how to maximize the value of one particular house.
     
  14. homebirtha

    homebirtha Well-Known Member

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    That happens a lot around here. A lot of threads lately have taken on this life of their own, with people inserting their own opinions about topics that have nothing to do with the original question asked. And they often turn into lectures and naysaying. I wish people would quit doing that. I find it, at best, annoying and, at worse, downright disrespectful.

    Anyway, good luck with the appraisal.

    >On the other hand, I don't think the other information was relevant to my >question, anyway, which was how to maximize the value of one particular >house.
     
  15. jillianjiggs

    jillianjiggs Well-Known Member

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    Converting a garage into a bedroom permanently can definately affect the home value negatively. I'd focus on simple updates, a fresh coat of paint, fixing your roof if it needs it, etc. I've live in a garage before, and it was made livable by insulating the garage doors and laying down some area rugs.